The Solution to The Health Care Problem
It’s funny how we can come to a conclusion about someone or something and feel that it’s right but in reality its actually completely wrong and we do things that are counterproductive to progress.
The transition from feeling what is true to knowing what is true is gained through knowledge and understanding.
There have been several protesters at insurance companies lately, including the one I work for. They are upset at premium increases. They think that the insurance industry is directly profiting from these premium increases. I am not making an argument to defend the insurance industry. There are certainly things the insurance industry can do in order to cut costs and pass along the savings to the consumer. What I do wish to defend though is that the demonization of the insurance industry alone is not only unfair but also counterproductive to health care reform.
The important question to ask is “Why are health care costs so high?”
I apologize for not preparing real numbers but I believe that real numbers can be distorted to reflect better or worse on the ideals of the person who prepares them. Real numbers though are not needed. What’s important is to see the nature of premium increases.
For illustrative purposes, I will split the costs of health care into 5 categories. These costs could be infinitely divided into further sub-categories such as CEO bonuses, the money doctor’s receive to pay for their car, research and development costs of prescription drugs, etc. But that would be overcomplicating the core issue.
Industry
Costs
Health Care Insurance
13%
Patient Care Facilities
35%
Doctors and Clinicians
33%
Prescription Medications
14%
Other
5%
If you paid $500 in premiums last month, here is where that money goes to:
Industry
Costs
Health Care Insurance
$65
Patient Care Facilities
$175
Doctors and Clinicians
$165
Prescription Medications
$70
Other
$25
The gray area represents what we call “claims” in the health care world.
Now let’s say the next year we see an increase of premiums by 10%. So that means you are now paying $550 per month for insurance.
At the same time, we see a shift in the drivers of health care costs:
Industry
Costs
Health Care Insurance
11%
Patient Care Facilities
32%
Doctors and Clinicians
33%
Prescription Medications
19%
Other
5%
Health care insurance was reduced by 2%. (Yay!)
Patient care facilities was reduce by 2%. (Yay!)
Doctors and Clinicians remained the same. (Meh.)
Prescription Medications increased by 5%. (Boo!)
Other Costs remained constant (Meh.)
Yet total premiums increased by 10% ($500 to $550).
Industry
Costs
Health Care Insurance
$61
Patient Care Facilities
$176
Doctors and Clinicians
$182
Prescription Medications
$105
Other
$28
So, who is the villain in all this? Wouldn’t it appear that the Prescription Medications industry is the greatest villain? In fact, when you look at the prescription medications industry, you will see that their profit margins are some of the highest in all industries while health insurance companies receive the lowest profits.
I disagree though. The greatest villain in all of this is us. All of us are responsible for submitting unnecessary claims that increase the pool of expenses that will be pushed back on the community of insurance policy holders. We support the shiniest doctor’s offices. We pay money to the insurance companies that have the best looking web site. We buy name brand drugs rather than generic drugs. We eat more and exercise less. The list goes on and on.
You might also find it surprising that most insurance companies are not public. The company I work for is a Not-For-Profit corporation and has been a nationwide leader in reducing costs for the benefit of the consumer. While the insurance industry takes 13% of your premiums, the company I work for took only 8.3% last year. That’s providing the same coverage for our consumers at 36% less costs compared to the rest of the industry. This is a great testament of what can be done when we align our core objectives to reducing our costs.
In summary, the point I want to make in all of this is that the health care problem is solvable but it requires that we follow the money trail and take measures to reward the individuals who are making progress in reducing the causes of health care costs and taking measures against the drivers that increase health care costs. For more, invaluable information about what can be done to fix healthcare, I suggest you do your own independent study of the drivers of health care costs. A good source that will get you started can be found here.